New York & Co. (NWY) Tops Q2 EPS by 3c

New York & Co. (NYSE: NWY) reported Q2 EPS of $0.05, $0.03 better than the analyst estimate of $0.02. Revenue for the quarter came in at $216.4 million versus the consensus estimate of $216.61 million.

• Net sales were $216.4 million, as compared to $224.1 million in the prior year. The decrease in net sales reflects a reduced store count and the shift of an important pre-Mother’s Day week into the first quarter, which resulted from the shifted retail calendar due to the 53rd week in fiscal year 2017, and was partially offset by increased sales from Fashion to Figure.
• Comparable store sales increased 0.6%, as compared to the same period last year, representing the fourth consecutive quarter of positive comparable store sales which was led by growth in the Company’s eCommerce business and strength in outlet stores, and in particular, outlet conversion stores.
• Gross profit as a percentage of net sales increased 150 basis points to 32.1% versus fiscal year 2017 second quarter gross profit percentage of 30.6%, reflecting the highest gross margin rate achieved in the second quarter since 2005. The increase during the quarter reflects a 160 basis point increase in merchandise margin, reflecting reduced product costs, decreased promotional activity and shipping efficiencies, partially offset by a 10 basis point decrease in the leverage of buying and occupancy costs due to lower gross sales.
• Selling, general and administrative expenses were $66.3 million, or 30.7% of net sales, as compared to $63.4 million, or 28.3% of net sales in the prior year period. The current year’s quarterly results included $0.4 million of non-operating charges, primarily related to an ongoing trademark infringement matter and a class action lawsuit. The prior year included a benefit of $1.7 million related to these matters. On a non-GAAP basis, selling, general and administrative expenses were $65.9 million, or 30.4% of net sales, as compared to non-GAAP selling, general and administrative expenses of $65.1 million, or 29.1% of net sales in the prior year. The increase during the quarter reflects increases in variable compensation accruals which are based upon operating profit results, partially offset by reductions in marketing expenses, and decreases in both store and home office payroll costs.
• GAAP operating income for the second quarter of fiscal year 2018 was $3.1 million, as compared to $5.2 million in the prior year. However, as previously stated, the prior year included a non-operating benefit of $1.7 million, as compared to the current year which included a charge of $0.4 million. Excluding these non-operating adjustments, non-GAAP operating income was $3.5 million, which significantly exceeded our guidance of $0.7 million to $1.7 million and was flat to the prior year’s non-GAAP operating income of $3.5 million despite the shift of a significant sales week into the first quarter of 2018 and the associated incremental gross margin contribution.
• GAAP net income for the second quarter of fiscal year 2018 was $3.1 million, or earnings of $0.05 per diluted share, as compared to $4.8 million, or earnings of $0.08 per diluted share in the prior year. On a non-GAAP basis, the second quarter adjusted net income was $3.5 million, or $0.05 per diluted share, as compared to $3.1 million, or $0.05 per diluted share last year.

Gregory Scott, New York & Company’s CEO stated: “We were very pleased with our strong operating results in the second quarter with positive comparable store sales, expansion in gross margin and operating profit which significantly exceeded our guidance. This strong performance contributed to the success of our Spring season, completing a successful first half of the year with operating income surpassing guidance and notable accomplishments toward our stated goals. Our results continue to demonstrate the successful execution of our strategy to evolve our operating platform to meet the needs of how consumers are shopping today while increasing efficiency across the enterprise. We believe the Company is becoming a key omni-channel shopping destination with sought after celebrity brands, great style and great value.

“Moving into the second half of the year, earlier this week, we announced a multi-year partnership with Kate Hudson which follows our already successful collaborations with Eva Mendes and Gabrielle Union – which provides us with another catalyst for growth and further differentiates and defines our Company from peers,” added Mr. Scott. “I am excited about the opportunities that lie ahead and believe we remain well-positioned to continue our positive performance in the Fall season, which is further supported by our guidancethat includes growth in operating income versus the comparable Fall season last year despite more difficult comparisons due to the prior year’s 53rd week calendar.”

For earnings history and earnings-related data on New York & Co. (NWY) click here.

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